Former President Donald Trump recently told Fox News host Maria Bartiromo that if re-elected, he would impose tariffs of a staggering 60 percent – or more – on Chinese imports, sparking a plan to escalate the trade war with China signaled that shaped his term of office.
Trump's argument to voters in 2024 is that the US economy was very strong during his time in office but has been reeling from the Covid-19 pandemic. If he wins a second term, he promises the same thing, with import tariffs as the centerpiece of his economic policy. Treasury Secretary Janet Yellen warned last month that such a plan would increase the cost of goods for Americans whose budgets are suffering from inflation.
Henry Tricks, who writes The Economist's Schumpeter column on global business, told Vox's Noel King on a recent episode of Today that Trump's plans for a second term are making the business world nervous. The following transcript is from their conversation and has been edited for length and clarity.
Noel King
If there's one thing Donald Trump is good at, it would be disruption. But you say Trump doesn't specifically plan to disrupt things this time.
Henry Tricks
[Trump is] He hopes to introduce economic policies that will ensure the economy grows in a similar way to what it did during his term in office from 2016 to 2020. And to be fair, the economy has performed quite well under his administration .
The danger is that his approach to economic policy actually risks exacerbating the economic problems facing Americans today. And above all, we are talking about high inflation there.
We know Donald Trump as a “cut taxes and raise tariffs” kind of guy. This time, his most important campaign promise concerns tariffs. He calls himself “Tariff Man” and has a plan to increase tariffs across the board in the USA.
Trump wants to effectively triple the average tariff rate. He also wants to take revenge against countries with particularly high tariffs on American products by raising American tariffs to the same level. And that could be quite detrimental to trading. Trade wars are never very good for the economy. They slow economic growth and tend to hit those with the lowest incomes hardest because tariffs raise the prices of consumer goods, such as the kinds of things you buy at the supermarket.
Noel King
Why would Donald Trump want to do something in the next four years if we actually voted for him that would make things more expensive for American consumers who are already struggling with inflation?
Henry Tricks
This is a question that many, many orthodox economists are asking. Trump's trade advisers are a rather strange and unorthodox bunch. They view a trade deficit as a sign of economic weakness, and America has a large trade deficit. So they believe that if they can raise tariffs, they can essentially turn America from a net importer to a net exporter.
It's an argument that has some supporters, but the more orthodox view is that the trade deficit is not actually due to low tariffs. It's more a result of America's low savings rates. And right now Americans are saving little because they are spending a lot. And it's this spending that actually drives the economy quite a bit.
The other thing is that Trump seems to think tariffs are a bit like taxes that generate income. So he hopes so [by] If he increases taxes on companies he doesn't like, such as B. Foreigners importing into the United States, he can use the revenue from these tariffs to offset the lower taxes of his previous administration.
Noel King
What other impact on the economy could Trump's plans for a second term have?
Henry Tricks
I've been talking to the business community, and one of the things that I found really surprising and interesting in talking to them was their concern about the migration issue that Trump was talking about. Business clearly supports the idea that America should have strong borders and that there should be legal, not illegal, immigration.
However, Trump has, at least reportedly, suggested that undocumented migrants in the United States will be sort of rounded up and possibly put in camps and deported. And the numbers that [are] The risks involved are huge, you know, we're talking about potentially millions of people.
Business is concerned about this, partly for humanitarian reasons, but also from an economic perspective, because there is a labor shortage. There are currently far more job openings than unemployed Americans. And the concern is that when you take literally millions of undocumented workers, you also take with you the people who work in essential frontline jobs, the people who pick vegetables, or the people who work in leisure and retail and so on, something like that. And it will only worsen the labor shortage.
Noel King
The giants of the business world are telling this to The Economist, but we're not seeing CEOs more broadly speaking out and saying that Donald Trump could pose a threat to the American economy. Or am I missing that?
Henry Tricks
They don't say it publicly. They are very afraid of sticking their heads above the parapet for a variety of reasons, some of which are really good reasons. If you talk to them, they'll say it's still very early in the presidential race. And these are two older men. Donald Trump has not yet officially secured the nomination as the Republican candidate. So entrepreneurs don't want to burn their bridges too early by openly criticizing him or his economic policies.
But there are other reasons why it's good to keep an eye on the cards. One is that the culture wars have actually been particularly damaging to some companies, and you look at what happened with Bud Light, for example. And they fear that if they openly criticize Donald Trump, they will receive the same reaction from the MAGA masses.
And it's really important to remember that they're not particularly supportive of the Biden administration's economic policies either. They believe that Joe Biden was not a pro-business president like, say, Barack Obama or Bill Clinton. They're worried about his antitrust policies and some of his industrial policies. And so there is not enough support for Joe Biden to prevail against Donald Trump.
Noel King
Despite all the worries, you also write in your article about some business leaders, some leading bankers who are considering the prospect of a second Trump term and saying, “We think it's going to be good.” And that's the only thing I can think of , is that you might remember four years ago when we were all kind of panicking and it wasn't great at all back then. The Trump years were chaotic and wild. But the economy didn't collapse. And even in the first year of Covid there was no collapse.
Why do you think some are willing to say it's not that big of a deal, folks?
Henry Tricks
Because they look at the strength of the economy at the moment, especially compared to other countries. And they say it's truly remarkable how the American economy was able to avoid a recession despite all the difficulties it faced from a contentious election, Covid, higher inflation and tighter monetary policy.
So they tend to be a little more complacent that, whatever comes, the American economy will somehow transcend politics. Some people say that.
Others fear that there is a kind of dangerous complacency here. Because what Trump is proposing in terms of higher tariffs, mass deportations, etc. – yes, there is the chaos you just alluded to, but more importantly, it risks endangering the system on which the American economy has been built has flourished for decades.
This is a system based on the rule of law, honoring treaties, the fact that the US engages in geopolitics to keep shipping lanes open through the Navy, and the like. There is resilience to the global economic structure that has been built over decades. And they fear it is razor-thin and could disappear overnight if Mr. Trump were to blow it up.
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